JDA targets 3PL market

The supply chain software company JDA has become such a fixture in the world of major retailers and manufacturers that it’s easy to forget the company also has a major presence in the third-party logistics provider market.
But there’s room for growth, the company said, evidenced by its decision earlier this year to create a dedicated 3PL business unit aimed at expanding its revenue from the sector.
The move is one of several JDA has undertaken in 2014 after spending 2013 digesting its merger with RedPrarie. That merger has given the company a leg up among customers seeking an integrated transportation management and warehouse management provider, and it left JDA executives looking at their next moves.
“At the end of last year, when we had completed our merger, we had a look at what our assets were,” said Todd Johnson, who will head the 3PL unit as global vice president.
Johnson is a longtime JDA veteran who’s been with the company through its acquisitions of Manugistics and I2, among others.
“We looked at what our key products, differentiators, and key markets were,” he said.
That led to JDA developing four key initiatives this year, over and above the company’s standard business lines:

A focus on distribution-centric supply chain, essentially bringing planning and execution systems into a single suite.

Flowcasting – a collaboration tool between retailers and manufacturers that responds to demand-sensing at the consumer level.

Omni-channel capabilities.

The 3PL initiative.

“We decided to have a stronger presence in the 3PL space,” Johnson said, noting that analysts estimate there is around $600 billion of in-sourced 3PL spend that will be outsourced. “The 3PL market as a whole is growing again. There are significant growth opportunities.”
As noted, JDA is not without a presence in the 3PL market. The company currently has about 200 3PL customers, including seven of the top global 3PLs that Johnson said have a “significant deployment.”
The internal goal for the new unit, which launched in February, is to grow revenue.
“We’re looking at essentially doubling our 3PL revenue by 2016,” he said.
The first step toward building its 3PL capabilities was creating an internal team focused on the market. Once JDA had assembled its in-house expertise on 3PLs, the goal post-launch was to enable 3PLs to get out of the silo-based transportation management and warehouse management spaces and integrate their TMS and WMS platforms, as well as offer them a more complete supply chain suite.

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Finally, Johnson said, the plan is to become a partner to 3PLs, more than just a software vendor.
“We don’t want to just have the solution,” he said. “We want to have a turnkey approach. Let us do this for you. And speed to market is vital. 3PLs have multiple deployments for their various customers, so you have to be able to deploy quickly.”
Johnson said JDA’s value for 3PLs comes from the fact that 3PL customers expect a lot from their logistics services partners at a low margin.
“There’s significant pressure on 3PLs to be the solutions provider, not just manager of transportation and warehousing,” he said. “It’s a low-margin business with a significant amount of competitive pressure commoditizing their core business. So the question is how do I differentiate in the market? From a solutions perspective, we have what the market needs, and we have it in an integrated solution.”
Johnson said JDA is counting on its use among shipper customers to provide efficiencies for its 3PL customers.
As an example, he said a consumer packaged goods manufacturer might use JDA for its core business (i.e. an area that it’s competent in), but then use a 3PL using JDA for the more variable or unknown pieces of its business. The benefit to the manufacturer is that both the self-managed and the 3PL-provided iterations of JDA link seamlessly.
“The 3PL market is different than how the retailer or manufacturer markets work,” Johnson said. “It’s almost like a channel for us. We didn’t break our 3PL unit into regions – it’s a global unit focused on 3PLs. We grouped the experts in our company to give us critical mass and create 3PL-specific functions and services. It’s not just (warehouse management system) services, it’s 3PL-specific WMS services.”

This article was published in the July 2014 issue of American Shipper.